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Kering Acquires Creed For $3.8 Billion To Boost Its Beauty Business

Kering, the French luxury group that owns brands such as Gucci, Saint Lauren, and Balenciaga, has acquired high-end French fragrance label Creed for 3.5 billion euros ($3.83 billion), according to the Financial Times. The deal, which was announced in June but not disclosed publicly, is part of Kering's strategy to create an in-house cosmetics business and compete with rivals such as LVMH and Chanel in the lucrative beauty sector.

Why Creed?

Creed is a family-owned perfume house that was founded in 1760 and claims to have created scents for royalty and celebrities, such as Queen Victoria, Winston Churchill, and Audrey Hepburn. The brand is known for its exclusive and expensive fragrances, such as Aventus, which sells for $435 for a 100 ml bottle. Creed has a loyal and affluent customer base, especially in the US, China, and the Middle East, where it operates more than 200 boutiques.

According to the FT, Creed generated revenues of about 300 million euros ($328 million) in 20222 and had an operating margin of more than 40%, making it one of the most profitable players in the fragrance industry. The brand also has a strong online presence, with e-commerce accounting for about 30% of its sales.

What Are Kering's Plans?

Kering has been eyeing the beauty market for a while, as it sees an opportunity to leverage its fashion brands and expand its product portfolio. The group has a joint venture with Coty to develop fragrances and cosmetics for Gucci, which is the biggest revenue driver. However, Kering wants to have more control over its beauty operations and create a dedicated division within the group.

By acquiring Creed, Kering will gain access to a niche and high-end segment of the fragrance market, which is expected to grow by 5.9% annually from 2021 to 2027m reaching $56.4 billion by 2027, according to Grand View Research. Kering will also benefit from Creed's expertise in perfume making, distribution, and digital marketing.

Kering plans to integrate Creed into its existing portfolio of fashion brands and develop synergies across its network. The group also intends to invest in Creed's product development, innovation, and sustainability initiatives. Kering hopes that Creed will help it attract new customers, especially younger and more diverse one, who are looking for unique and personalized experiences in the beauty sector.

How Will The Deal Impact The Luxury Industry?

The acquisition of Creed by Kering is a sign of the increasing consolidation and competition in the luxury industry, as major players seek to diversify their offerings and capture new markets. The beauty sector is particularly attractive for luxury groups, as it offers higher margins, faster growth, and more resilience than fashion during economic downturns.

Kering's move follows similar deals by its rivals, such as LVMH's acquisition of Tiffany & Co. for $15.8 billion in 2020 and Chanel's purchase of Ormaie, a niche fragrance brand, in 2021. These deals reflect the growing demand for premium and exclusive products among luxury consumers, who are willing to pay more for quality, craftsmanship, and heritage.

The deal also poses a challenge for independent perfume houses, such as Diptyque, Jo Malone and Byredo, which may face increased competition from larger and more powerful groups. However, some analysts believe that there is still room for niche players in the fragrance market, as long as they can differentiate themselves with distinctive stories, ingredients, and packaging.

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